Cortex Business Solutions Inc.
TSX VENTURE : CBX

Cortex Business Solutions Inc.

March 15, 2016 08:30 ET

Cortex Business Solutions Reports Q2 F2016 Financial Results

CALGARY, ALBERTA--(Marketwired - March 15, 2016) - Cortex Business Solutions Inc. (TSX VENTURE:CBX), an online business-to-business, network as a service, that helps companies reduce invoice processing times by connecting and interacting with each other, today announces its Q2 F2016 results.

"It has been an incredibly difficult time in the oil and gas market over the past several months. The continued instability in the market has made it imperative for some companies to look at drastic cost cutting measures in an attempt to weather the storm." said Joel Leetzow, President and CEO of Cortex. "In our last market update, I spoke of the difficult decisions Cortex had made to right-size the business, and improve our internal processes as part of our commitment to shareholders. Through those actions, we find ourselves in a stable position where we can maintain our support of customers in the energy sector, while pushing ahead with our vertical expansion strategy.

I continue to be proud of the results we have achieved, and although we have seen a slight decrease in total revenue, it was not unexpected given the considerable downturn in the oil and gas market. Our improved cash position and financial results provide the stability and ability to not only weather the economic storm, but to focus on growing the business by offering savings to our current and future customers."

Q2 F2016 Operational Highlights:

Operational highlights for the three months ended January 31, 2016 compared to the three months ended January 31, 2015 are summarized below:

  • The cash used in operating activities improved to $400,319 compared to $2,149,741.
  • The net loss improved 73% to $619,256 from $2,281,109.
  • Total revenue declined 9%.
  • Adjusted EBITDA of $(100,089).
  • Billable transactions declined 21% while active suppliers increased 2%.
  • Total expenses declined 38% or $1,930,832.
  • Working capital of $5,939,187 at January 31, 2016.

Operational highlights for the six months ended January 31, 2016 compared to the six months ended January 31, 2015 are summarized below:

  • The cash used in operating activities improved to $538,840 from $3,154,537.
  • The net loss improved to $1,428,391 from $4,215,507.
  • Total revenue declined 5% or $268,884.
  • Adjusted EBITDA of $(368,248)
  • Billable transactions declined 20% over the six month period.
  • Total expenses declined 32% or $3,084,383.

Three months ended January 31, 2016

Revenue

96% of the total revenue of the Company comes from access and usage fees. Although these fees declined 2% Q2 F2016 over Q2 F2015, this says a lot about the value our Customers see in the Cortex Network. During cost cutting times, our customers are renewing their contracts with Cortex as they see the value even when their transaction volumes are down due to the downturn in the energy sector.

  • Access fees were $1,391,036 in Q2 F2016 ($1,133,768 - Q2 F2015) an increase of 23%.

  • Usage fees were $1,052,938 ($1,372,462 - Q2 F2015) a decrease of 23%.

  • Integration and set-up fees revenue declined Q2 F2016 over Q2 F2015 by 26%, or $39,264 (Q2 F2016 - $110,729; Q2 F2015 - $149,993).

  • Project management fees decreased 98%, or $162,990, Q2 F2016 compared to Q2 F2015.

Gross Profit and Cost of Sales

Cost of sales, as reported, decreased 9% Q2 F2016 over Q2 F2015 resulting in gross profit, as reported, remaining at 45% of total revenue.

There was some restructuring in the delivery organization at the end of Q2 F2016, which will further reduce costs in Q3 F2016 forward.

Other Expenses

  • Sales and marketing declined 70% Q2 F2016 over Q2 F2015.

  • Research and development declined 49% Q2 F2016 over Q2 F2015.

  • General and administrative expenses declined 32% Q2 F2016 over Q2 F2015.

  • Severance and termination charges declined 60% Q2 F2016 over Q2 F2015.

Cash Position

At January 31, 2016, Cortex Business Solutions Inc. held $6,479,876 in cash and $60,000 in short-term investments, compared to $3,986,950 and $60,000, respectively, at July 31, 2015.

  • Cash used in operating activities was $400,319 in Q2 F2016 compared to $2,149,741 in Q2 F2015.

Six months ended January 31, 2016

Revenue - six month period

96% of the total revenue of the Company comes from access and usage fees. These fees were flat for the six months ended January 31, 2016 compared to the six months ended January 31, 2015.

  • Access fees for the six month period ended January 31, 2016 were $2,731,694 ($2,165,730 - six months ended January 31, 2015) an increase of 26%.

  • Usage fees for the six month period ended January 31, 2016 were $2,228,574 ($2,770,728 - six months ended January 31, 2015) a decrease of 20%.

  • Integration and set-up fees revenue for the six month period ended January 31, 2016 were $208,785 down 29% from the six month period ended January 31, F2015 of $292,569.

  • Project management fees for the six month period ended January 31, 2016 were $16,792 down 93% from the six month period ended January 31, F2015 of $225,702.

Gross Profit and Cost of Sales - six month period

Cost of sales, as reported, decreased 13% for the six month period ended January 31, 2016 over the six month period ended January 31, F2015 resulting in gross profit, as reported, improving 8% to 45% of total revenue.

Other Expenses - six month period

  • Sales and marketing declined 67%.

  • Research and development declined 30%.

  • General and administrative expenses declined 27%.

  • Severance and termination charges declined 39%.

Cash Position - six month period

At January 31, 2016, Cortex Business Solutions Inc. held $6,479,876 in cash and $60,000 in short-term investments, compared to $3,986,950 and $60,000, respectively, at July 31, 2015.

  • Cash used in operating activities was $538,840 compared to $3,154,537.
Cortex Business Solutions Inc.
Condensed Consolidated Interim Statement of Financial Position
(Prepared in Canadian dollars)
(unaudited)
January 31 July 31
2016 2015
Assets
Current assets
Cash $ 6,479,876 $ 3,986,950
Short-term investments 60,000 60,000
Accounts receivable 848,034 868,452
Prepaid expenses and deposits 185,595 154,861
7,573,505 5,070,263
Deposits 35,061 35,061
Property and equipment 352,196 413,961
Intangible assets 903,348 1,763,804
$ 8,864,110 $ 7,283,089
Liabilities
Current liabilities
Accounts payable and accrued liabilities $ 843,670 $ 948,311
Deferred revenue 170,802 230,989
Current portion of rebate provision 544,550 695,207
Income tax payable 75,296 57,148
1,634,318 1,931,655
Rebate provision 237,843 77,557
1,872,161 2,009,212
Shareholders' Equity
Share capital 60,277,555 57,640,393
Accumulated other comprehensive income 866,792 580,502
Warrants 980,941 980,941
Contributed surplus 8,071,570 7,848,559
Deficit (63,204,909 ) (61,776,518 )
6,991,949 5,273,877
$ 8,864,110 $ 7,283,089
Cortex Business Solutions Inc.
Condensed Consolidated Interim Statement of Loss and Comprehensive Loss
For the three and six months ended January 31, 2016 and 2015
(Prepared in Canadian dollars)
(unaudited)
Three months ended
January 31
Six months ended
January 31
2016 2015 2016 2015
Revenue
Access and usage fees $ 2,443,975 $ 2,506,230 $ 4,960,268 $ 4,936,458
Integration fee and set-up fees 110,729 149,993 208,785 292,569
Project management 3,869 166,859 16,792 225,702
2,558,573 2,823,082 5,185,845 5,454,729
Cost of Sales 1,397,136 1,541,545 2,809,682 3,245,331
Gross Profit 1,161,437 1,281,537 2,376,163 2,209,398
Expenses
Sales and marketing 324,954 1,083,592 673,588 2,047,409
Research and development costs 489,545 964,297 1,075,248 1,540,804
General and administrative 858,327 1,253,361 1,876,228 2,583,693
Severance and employee termination costs 105,626 263,625 161,734 263,625
1,778,452 3,564,875 3,786,798 6,435,531
Loss before finance income (617,015 ) (2,283,338 ) (1,410,635 ) (4,226,133 )
Finance (expense) income (1,959 ) 2,229 (4,495 ) 10,626
Current tax expense (282 ) - (13,261 ) -
Net loss $ (619,256 ) $ (2,281,109 ) $ (1,428,391 ) $ (4,215,507 )
Other comprehensive earnings
Items that may be reclassified subsequently to net loss:
Foreign exchange gain on foreign operations 244,411 315,462 286,290 554,033
Comprehensive loss $ (374,845 ) $ (1,965,647 ) $ (1,142,101 ) $ (3,661,474 )
Net loss per share-basic and diluted $ (0.07 ) $ (0.31 ) $ (0.16 ) $ (0.58 )
Cortex Business Solutions Inc.
Condensed Consolidated Interim Statement of Changes in Shareholders' Equity
(Prepared in Canadian dollars)
(unaudited)
Number of
Common
shares
Common
shares
value
Number of
Warrants
Warrants
value
Contributed
surplus
Accumulated
Other
Comprehensive
Income
Deficit Total
shareholders'
equity
Balance - July 31, 20147,233,949$ 56,778,460 447,580$ 980,941$ 7,500,703$ (77,285)$ (53,850,720)$ 11,332,099
Net loss-- ---- (4,215,507)(4,215,507)
Issued during the period192,400865,800 ---- - 865,800
Share issue costs-(3,867)---- - (3,867)
Foreign exchange translation of foreign operations-- ---554,033 - 554,033
Stock-based compensation-- --218,893- - 218,893
Balance - January 31, 20157,426,34957,640,393 447,580980,9417,719,596476,748 (58,066,227)8,751,451
Balance - July 31, 20157,426,34957,640,393 447,580980,9417,848,559580,502 (61,776,518)5,273,877
Net loss-- ---- (1,428,391)(1,428,391)
Issued during the period1,551,3753,102,750 3,102,750
Issuance costs-(364,366)---- - (364,366)
Translation of foreign operations-- ---286,290 - 286,290
Stock-based compensation-- --121,789- - 121,789
Compensation units issued in conjunction with private placement-(101,222)--101,222- - -
Balance - January 31, 20168,977,724$ 60,277,555 447,580$ 980,941$ 8,071,570$ 866,792 $ (63,204,909)$ 6,991,949
Cortex Business Solutions Inc.
Condensed Consolidated Interim Statement of Cash Flows
For the three and six months ended January 31, 2016 and 2015
(Prepared in Canadian dollars)
(unaudited)

For the three
months ended
January 31

For the six
months ended
January 31

2016 2015 2016 2015
Cash provided by (used in)
Operating activities
Net loss $ (619,256 ) $ (2,281,109 ) $ (1,428,391 ) $ (4,215,507 )
Items not affecting cash
Stock-based compensation 56,628 80,908 121,789 218,893
Amortization 460,298 465,299 920,598 923,836
Salaries paid in shares - 865,800 - 865,800
Accretion on rebate provision 4,799 7,987 9,629 15,974
Loss on disposal of equipment 2,811 - 2,811 -
Cash from operating activities before non-cash working capital
(94,720
)
(861,115
)
(373,564
)
(2,191,004
)
Changes in non-cash working capital (305,599 ) (1,288,626 ) (165,276 ) (963,533 )
Net cash used in operating activities (400,319 ) (2,149,741 ) (538,840 ) (3,154,537 )
Financing activities
Proceeds from issuance of shares - - 3,102,750 -
Share issuance costs - (3,867 ) (364,366 ) (3,867 )
Net cash (used in) from financing activities
-

(3,867
)
2,738,384

(3,867
)
Investing activities
Acquisition of property and equipment - (84,717 ) (1,189 ) (88,950 )
Software and software development costs - (5,406 ) - (5,406 )
Net cash used in investing activities
-

(90,123
)
(1,189
)
(94,356
)
Effect of exchange rate changes on cash and cash equivalents held in foreign currency

$ 249,244


$ 479,435


$ 294,571


$ 564,111
Cash (outflow) inflow
(151,075
)
(1,764,296
)
2,492,926

(2,688,649
)
Cash, beginning of period 6,630,951 8,623,308 3,986,950 9,547,661
Cash, end of period $ 6,479,876 $ 6,859,012 $ 6,479,876 $ 6,859,012
Non-cash transactions:
Issuance of shares in lieu of salaries and bonuses including prior period amounts accrued $ - $ 865,800 $ - $ 865,800

Conference Call

Cortex management will host a conference call, followed by a question and answer period.

The details of the conference call are as follows:

Date: Wednesday, March 16, 2016
Time: 11:00 a.m. Eastern time (9:00 a.m. Mountain time)
Toll-free dial-in number: 1-800-355-4959
International dial-in number: 1-416-340-8527

Please call the conference telephone number ten minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Cortex Business Solutions at 403-219-2838.

A replay of the conference call will be available after the call through March 23, 2016

Toll-free replay number: 1-800-408-3053
Toll replay number: 1-905-694-9451
Replay ID: 5919045

About Cortex Business Solutions

Cortex Business Solutions Inc. (TSX VENTURE:CBX) is an enterprise business-to-business network that enables electronic invoicing for buying and suppling organizations, to reduce the time required to process invoices through the use of flexible connections methods and tools that leverage existing customer technologies and processes. Access to the Cortex Network enhances the exchange of documents allowing companies to connect and interact with each other to grow their businesses. For more information, please visit www.cortex.net.

Contact Information